Monday 07/01/19

  1. In MACROECONOMIC NEWS, the US and China hold trade talks and China announces a massive stimulus
  2. In RETAIL NEWS, there are wobbles in the US, Selfridges enjoys a good Christmas and Morrisons slashes prices
  3. In TECH NEWS, FB dating is looking good, Chetwood is the new banking disrupter and we look at what to expect at CES
  4. In OTHER NEWS, I show you a video that will make you shudder, but is strangely compelling. For more details, read on…



So the US and China head into more trade talks and China announces big fiscal stimulus…

US and China’s face-to-face talks seen as first step towards ending trade war (The Guardian, Lily Kuo) heralds a new round of talks between the two sides that will be the first since Donald Trump and Xi Jinping agreed a truce at the G20 meeting at the end of last year. The US delegation, who are travelling to Beijing for the talks, does not include any top US officials which would suggest that there will be higher level meetings to follow. * SO WHAT? * No-one’s really expecting anything earth-shattering from these talks – and even if some kind of agreement IS made, another major sticking point will be how to monitor whether both parties are holding up their side of the bargain. This will continue, but at least things are going in the right direction for now.

In China approves $125bn of rail projects in fiscal stimulus (The Financial Times, Tom Hancock) we see that $125bn worth of new projects have been approved in the

past month by the National Development and Reform Commission, the country’s top planning agency, as part of an overall plan to mitigate against China’s current economic slowdown. China will roll out 6,800km of railway lines this year – an impressive 40% above the amount added last year – including 3,200km of high-speed rail. This is in sharp contrast to this time last year when Beijing stopped investment in subway lines to stem the growth in local government debt. * SO WHAT? * This sounds like a reasonable enough reaction to an economic slowdown, but I always shudder when I hear about sudden massive spend on infrastructure as it can sometimes be a desperate measure when nothing else is working. I think that it is a classic way of kicking the can down the road as infrastructure takes tons of time and tons of money to start working – and is often used to bat away criticisms that nothing is being done to stimulate the economy (they can always say something along the lines of “yes, in the short term, things are difficult – but we’re thinking about long term growth, hence this big expenditure on infrastructure” etc.). Still, $125bn is a decent chunk of change, so it may just work. It’ll take us quite some time to see whether this works out and whether it just benefits domestic companies or whether foreigners can get a piece of the action.



US retail looks strong – but concerns remain, Selfridges had a good Christmas and Morrisons are cutting prices by 20%…

US retail recovery under new scrutiny on Wall Street (Financial Times, Alistair Gray) shows that, although holiday sales have been breaking records, there are concerns over the strength of the recovery as new data from analytics group ShopperTrak shows that footfall in stores is falling, rental growth at malls is looking pretty sluggish and demand for consumer electronics appears to be hitting the buffers (for now) as the exodus to online retail continues. Having said that, initial numbers from Mastercard gave reasons for cheer as festive sales rose at their fastest rate for six years – and we will see whether the joy continues as companies such as Macy’s, Target and Costco are due to report trading updates for the period in the next few days. * SO WHAT? * The key concern here is of whether Amazon-paranoia is leading retailers to cut their margins – and therefore profitability – in order to compete with the e-tailing giant. Retailers are continuing to attempt to address the balance between their online and offline offering and Brian Field, director of retailing at ShopperTrak observed that the “overall impact [of the shift online] has begun to slow down, indicating that both retailers and shoppers alike are starting to find a balance of activity between shopping channels”. 

Negative newsflow on UK retail has become the norm these days, so Selfridges a lonely star on the high street (The Times, Deirdre Hipwell) stands out in a good way as

figures set to be published today will show that sales at its stores and online rose by 8% in the 24 days to Christmas versus the same period in the previous year. Selfridges is made up of four stores in the UK and has an online business that ships to 130 countries worldwide. Interestingly, the department store put some effort into the customer experience – with in-store entertainment and new and exclusive products – and sales in the Oxford Street flagship rose by 10% in the same period. * SO WHAT? * I keep saying this – so apologies to regular readers of Watson’s Daily – but department stores need to concentrate on improving the customer experience they are providing in order to survive e-tailer domination because they sure as hell won’t be able to beat them on price alone. Trading updates will be trickling out this week from the likes of Tesco, Sainsbury’s, M&S and John Lewis – so we’ll know soon enough whether this was a one-off or not.

Morrisons to slash prices by 20% to defend market share against discounters (The Guardian, Miles Brignall) brings us back down to earth, however, as it seems that the UK’s fourth biggest supermarket has hit the panic button in the face of a continued German onslaught from Aldi and Lidl. Morrisons announced that it would continue to protect its market share by cutting 20% of the prices of “store cupboard favourites” like tinned tomatoes, cereal, sandwich fillers, ready meals and multivitamins. An Aldi spokesman sounded quite relaxed when he said “We see this every January, and Morrisons is unlikely to be the last one to cut some specially chosen prices”. * SO WHAT? * Will this spark a proper price war, I wonder? If so, this could be the start of a race to the bottom in terms of pricing – and with Brexit uncertainty hanging over everyone at the moment – it won’t be a great backdrop. We’ll find out more as the week progresses.



We see how Facebook’s dating experiment is working out, a new fintech challenging the banks and what’s coming up at CES…

Inside Facebook’s dating experiment in Colombia (Financial Times, Gideon Long) gives us an update on how things are going with Facebook’s foray into dating services. It started Facebook Dating in Colombia in September and has, since then, rolled out the service to Canada and Thailand in November. Facebook says it wants to differentiate itself from other dating websites by moving away from a quick yes/no model to something more considered and suggests dates based on your Facebook behaviour and interests. Users can also use Facebook Events and Groups to find matches. The share price of Match Group, which owns OKCupid, PlentyofFish, controls Tinder and has a 31% market share in Canada, fell by about 20% since Facebook said it was launching there. * SO WHAT? * I think that this sounds like a winner as far as Facebook is concerned – and everyone else in the space is right to be nervous given their installed user base and the fact that their lives are already on there anyway. Yes, Facebook has trust issues at the moment – and maybe people will be paranoid that their dating life will mix with their Facebook life, but I think that people will be quite relaxed about it ultimately. I see it as a bit of a development of the “People you may know” feature that could have more consequences ????????.

Chetwood seeks to lure customers from big UK banks (Financial Times, Nicholas Megaw) heralds the arrival of

yet another disruptive upstart to stir things up in UK banking as the Elliott Management-backed fintech lender announced that it has received a full banking licence in the UK. Chetwood began lending last year and got Bank of England approval to start taking deposits in December, which made it the only new retail bank to get a licence in 2018. The former deputy head of HSBC’s UK retail bank and now current chief exec of Chetwood, Andy Mielczarek, said that the bank would use data science and new tech to target customers with innovative products. Chetwood joins the likes of Monzo, Revolut and N26 in the digital banking world. Mielczarek believes that Chetwood would be profitable in between 18 and 24 months and that it would partner up with existing companies to distribute its products rather than building a single customer-facing brand. Chetwood’s co-founder Mark Jenkinson also said he was open to the possibility of licensing out the bank’s core banking platform, called Yobota. * SO WHAT? * Another day, another digital bank, it seems. This is great in theory, but I wonder whether the market for these types of banks is starting to look a little crowded. Anyway, as far as I’m concerned, this sounds like a particularly interesting prospect given that it’s willing to sell its platform – could it become the Ocado of banking??

I thought I’d include What to expect at CES 2019: from smart speakers to intelligent toilets (Financial Times, Tim Bradshaw) given that the annual tech jamboree is kicking off tomorrow in Las Vegas. It is likely to feature loads of 5G related stuff, more on smart speaker and virtual assistant connectivity with other devices, as well as developments in EVs and scooters amongst other things. I’ll keep you informed of anything interesting as it develops!



And finally, in other news…

I thought I’d leave you with a video that is simultaneously a bit creepy, but also strangely compelling in Hikers’ horror discovery after thinking they’d poked ‘furry hibernating animal’ (The Mirror, Laura Forsyth * shudders *. Have a great day!

Some of today’s market, commodity & currency moves (as at 0817hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq *DAX *CAC-40 *Nikkei **Shanghai **
6,837 (+2.16%)23,433 (+3.29%)2,532 (+3.43%)6,73910,768 (+3.37%)4,737 (+2.72%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)